Global markets remain on high alert as President Donald Trump's nomination of Kevin Warsh to lead the U.S. Federal Reserve sparks renewed debate about central bank independence. The February 2 announcement triggered immediate turbulence, with gold prices plunging 12% to $4,720 per ounce and silver dropping 34.67% to $75.38 amid expectations of aggressive monetary tightening.
Analysts are closely monitoring whether Warsh, if confirmed by the Senate in late May, will maintain the Fed's traditional adherence to its 1913 mandate or align more closely with Trump's demands for rapid rate cuts. The current 3.50-3.75% federal funds rate remains far above the 1% level repeatedly advocated by the White House.
This tension reflects an ongoing institutional clash. Current Chair Jerome Powell has maintained the Fed's dual mandate of price stability and maximum employment, resisting political pressure through three moderate rate cuts in 2025. However, Trump's unprecedented interventions – including legal challenges over Fed operations and the controversial dismissal of board member Lisa Cook – have raised constitutional questions now pending before the Supreme Court.
Market observers suggest the coming months will test whether the Fed can preserve its operational independence while navigating competing demands for monetary easing and balance sheet reduction. The outcome could redefine global investors' approach to dollar-denominated assets and safe-haven commodities through 2026.
